Competition and Dynamic Pricing in Markets with Consumer Switching Costs

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Abstrakt

In markets with switching costs, prices increase as firms’ market shares grow. I study the effect of entry on these price dynamics in the Dutch mortgage market. I exploit incumbents’ multi-product nature to control for unobserved firm-level differences, while a difference-indifferences strategy controls for market-level shocks by exploiting that only some mortgage products faced increased competition. Consistent with a simple theoretical framework, banks with more locked-in customers decrease their interest rates less after entry than smaller incumbents. This can explain why policies that encourage competition often disappoint in markets with switching costs. I also discuss implications for competition policy.
OriginalsprogEngelsk
Publikationsdato2020
Antal sider35
StatusUdgivet - 2020
BegivenhedThe 18th Annual International Industrial Organization Conference. IIOC 2020 - Northeastern University, Boston, USA
Varighed: 1 maj 20203 maj 2020
Konferencens nummer: 18
https://cssh.northeastern.edu/economics/iioc/

Konference

KonferenceThe 18th Annual International Industrial Organization Conference. IIOC 2020
Nummer18
LokationNortheastern University
LandUSA
ByBoston
Periode01/05/202003/05/2020
Internetadresse

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